How & Why SpaceX is Moving the AI Data Center Race to Space
- Finance
ThePostMaster- 0
- 10 minutes read
The acquisition of xAI by SpaceX will value the combined entity at $1.25 trillion. What’s important for investors to understand is that, in this case, the combined entity will eventually be worth more than the sum of its parts because it will transform SpaceX into a vertically integrated AI-infrastructure play and will strengthen the Musk ecosystem. In my view, the primary goal of the acquisition is to leverage SpaceX’s massive payload capacity and near-monopoly in space to gain an edge in the AI data center race.
As hyperscalers like Amazon (AMZN), Alphabet (GOOGL), and Microsoft (MSFT) jockey for AI dominance, compute will be king (as it is needed to train large AI models). However, currently, the main headwind for the AI buildout is energy scarcity. The U.S. electric grid is already overwhelmed, and with more energy-hungry data centers being built, this will only worsen. Additionally, the Trump Administration has warned that it will not allow U.S. big tech companies to drive up electricity costs for U.S. households. In other words, big tech companies will need to produce their own off-grid energy or compensate U.S. households for any electricity price hikes.
Elon Musk has stated that the solution to this problem is to house AI data centers in space. Not only is solar energy abundant in space, but cosmic data centers would also be cooled naturally and cheaply by the frigid temperatures there. Remember, Tesla (TSLA) has a thriving energy business and acquired SolarCity in 2016. Tesla Energy also has the megapack, which allows users to store unused electricity.
The SpaceX/xAI deal will strengthen Musk’s growing dominance in satellites and communications. Companies like Viasat (VSAT) use fewer, more expensive Geostationary (GEO) satellites. Conversely, Starlink leverages thousands of small, low-cost satellites in Low Earth Orbit (LEO). The deal may squeeze prices and make VSAT’s business less profitable. That said, the stock is holding relatively well so far, so the impact is yet to be a concern for investors. Meanwhile, EchoStar (SATS), a satellite TV and communications provider, should be insulated from any negative outcomes, as it already has a long-term licensing deal with SpaceX to provide service to Boost Mobile subscribers.
The SpaceX and xAI entity will help the company continue to gain momentum in the national security arena. AI and space synergies have several important uses in national security, such as satellite imagery (analyzed with AI) and government satellite constellations powered by hardened AI models. SpaceX will have an edge versus traditional defense companies because it will be a one-stop shop for launch, connectivity, and AI for defense. That said, it’s hard to be bearish on defense stocks when 2026 will be a record year for defense spending of ~$840 billion. In other words, I expect SpaceX to take market share, but since the entire pie is growing, I remain bullish on defense names like LMT.
